KUALA LUMPUR: Shares in AirAsia Group Bhd fell marginally in early trade Tuesday after it announced a fresh RM1bil capital raising plan.

The budget carrier fell 2.26%, or two sen to 86.5 sen with 6.53 million shares traded.

AirAsia has proposed rights issue of redeemable convertible unsecured Islamic debt securities (RCUIDS) to raise up to RM1.02bil to finance the company’s operations and business expansion.

The airline is offering existing shareholders the right to buy two RCUIDS, with one free detachable warrant, for every six AirAsia shares currently held.

Each RCUIDS will be priced at a nominal value of 75 sen apiece.

The RCUIDS come with a seven-year tenure and a profit rate of 8% per year. Each RCUIDS are also convertible to one new AirAsia share on a one-to-one basis.

About RM380mil has been set aside to pay for the group’s fuel hedging settlement and aircraft leases, while RM122mil was allocated for its digital business.

A total of RM508mil has been earmarked for working capital purposes.

“The proposed rights issue will enable the company to raise funds to provide the group with sufficient funding to ride through the current challenging environment and meet the group’s funding requirements,” AirAsia said.

The group has projected to raise between RM615.9mil and RM1.02bil under the minimum subscription level and full subscription level respectively.

AmInvestment Bank Research has maintained its “sell” call and forecasts, but trimmed its fair value to 61 sen for AirAsia based on 8x FY23F EPS, having reflected the dilution from new shares from the acquisition of BigLife.

“At 8x, we value AirAsia at a discount to its global peers, Ryanair and Southwest Airlines (10x–11x forward PE) to take account of AirAsia’s relatively smaller size. There is a 3% premium to our FV to reflect our 4-star ESG rating,” it said.

“The latest development is within our expectations that a massively dilutive cash call is inevitable given AirAsia’s damaged balance sheet in the aftermath of the pandemic. The proceeds will come in handy to sustain its business temporarily,” AmInvestment said.

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